Auto sectors' financials better than others in India Inc: ReportCHENNAI: In terms of financial health, the automobile sector seems to be in better shape than the rest of India Inc. According to a recent report by Ind-Ra on refinancing risks among India's top 500 corporate borrowers, auto and component sector reported a much higher proportion of well-managed borrowers compared to more leveraged sectors like metal & mining, power, infrastructure, telecom and oil & gas.

An overwhelming number of entities in the auto sector falls in HER (high ease of refinancing) and MER (moderate ease of refinancing) categories. Analysts say this shows that the overall auto industry has a better debt risk profile than some of the highly leveraged sectors in the top 500 borrower basket.

"Auto and auto component companies are in much better shape in terms of debt management. On average auto EBIDTA has fared better than 500-top borrower average. In each of the four categories we have divided the total 500 top borrowers — high ease entities (HER), medium ease entities (MER) and elevated risk (ERR) (Elevated risk of refinancing) and stressed — auto margins have fared better. In fact, of the auto/component companies we analysed as part of the 500 corporate borrowers, 85% of the debt in auto and automotive supplier industry fell in the comfortable refinancing potential (HER, MER) category," said Kartik Shetty, analyst, Ind-Ra.

That means that there is little chance of a big scale default by an auto/component company compared to other sectors with more debt exposure.

The Ind-Ra study analysed the FY15 and FY16 debt of 500 top corporate borrowers belonging to 26 different industries. "The highest debt as a proportion of total debt held by these 500 companies is in metal & mining at 18.46% followed by infrastructure 12.81%, power at 11.55%, telecom 10.65% and oil &gas 7.52%," said Shetty. Auto & components come in sixth at 5.28% while FMCG, Airlines, Logistics and Retail have the lowest percentage of debt.

The auto industry has been helped by EBITDA growth, which has kept the operating margins positive.

"The margin growth in auto sector is higher than the average growth in the three distinct refinancing categories — HER,MER and ERR," said Shetty.